- Net revenue up 3 percent sequentially
- Quarterly GAAP gross margin of 51 percent; Quarterly non-GAAP gross margin from continuing operations of 59 percent
-
Quarterly GAAP diluted EPS of
$1.26 ; Quarterly non-GAAP diluted EPS from continuing operations of$2.09
Basis of Presentation
First Quarter Fiscal Year 2015 GAAP Results
Net revenue was
Gross margin was
Operating expenses were
Operating income was
Net income, which includes the impact of discontinued operations, was
The Company's cash balance at the end of the first fiscal quarter was
The Company generated
On
First Quarter Fiscal Year 2015 Non-GAAP Results From Continuing Operations
The differences between our GAAP and non-GAAP results are described generally under "Non-GAAP Financial Measures" below, and presented in detail in the financial reconciliation tables attached to this release.
Net revenue from continuing operations was
Gross margin from continuing operations was
Operating income from continuing operations was
Net income from continuing operations was
| First Quarter Fiscal Year 2015 Non-GAAP Results | Change | ||||
| (Dollars in millions, except EPS) | Q1 15 | Q4 14 | Q1 14 | Q/Q | Y/Y |
| Net Revenue | $1,657 | $1,610 | $709 | +3% | +134% |
| Gross Margin | 59% | 58% | 52% | +1ppt | +7ppt |
| Operating Expenses | $293 | $303 | $142 | --$10 | +$151 |
| Net Income | $596 | $556 | $217 | +$40 | +$379 |
| Earnings Per Share - Diluted | $2.09 | $1.99 | $0.84 | +$0.10 | +$1.25 |
"We had a strong start to our fiscal year with better than expected 3 percent sequential revenue growth in the first quarter, driven by our wireless revenues, which grew by 90 percent from the same quarter last year." said Hock Tan, President and CEO of
Other Quarterly Data
| Percentage of Net Revenue | Growth Rates | ||||
| Net Revenue by Segment | Q1 15* | Q4 14* | Q1 14 | Q/Q | Y/Y |
| Wireless Communications | 40 | 39 | 49 | 6% | 90% |
| Enterprise Storage | 29 | 29 | -- | 5% | -- |
| Wired Infrastructure | 21 | 22 | 32 | -1% | 52% |
| Industrial & Other | 10 | 10 | 19 | -4% | 21% |
| * Represent percentages of non-GAAP net revenue | |||||
| Key Statistics (Dollars in millions) | Q1 15 | Q4 14 | Q1 14 | ||
| Cash From Operations | $481 | $381 | $229 | ||
| Depreciation | $54 | $51 | $32 | ||
| Amortization | $172 | $199 | $25 | ||
| Capital Expenditures | $162 | $189 | $52 | ||
| Non-GAAP Days Sales Outstanding | 39 | 42 | 42 | ||
| Non-GAAP Inventory Days On Hand | 67 | 70 | 76 | ||
Second Quarter Fiscal Year 2015 Business Outlook
Based on current business trends and conditions, the outlook for continuing operations for the second quarter of fiscal year 2015, ending
| GAAP | Reconciling Items | Non-GAAP | |
| Sequential Change in Net Revenue | down 4% to flat | $33M | down 3% to up 1% |
| Gross Margin | 50.0% plus/minus 1% | $152M | 58.5% plus/minus 1% |
| Operating Expenses | $422M | $128M | $294M |
| Interest and Other | $49M | -- | $49M |
| Taxes | $30M | $7M | $37M |
| Diluted Share Count | 282M | 7M | 289M |
Reconciling items include:
-
Non-GAAP Revenue includes
$33 million of LSI intellectual property licensing revenue not included in GAAP revenue as a result of the effects of purchase accounting for the LSI acquisition;
-
Non-GAAP Gross Margin includes the effects of
$33 million of LSI intellectual property licensing revenue and excludes the effects of$113 million of amortization of intangible assets,$5 million of share-based compensation expense, and$1 million of restructuring charges.
-
Non-GAAP Operating Expenses exclude
$59 million of amortization of intangible assets,$47 million of share-based compensation,$15 million of acquisition-related costs and$7 million of restructuring charges; and
-
$7 million provision at the Taxes line represents the tax effects of the reconciling items noted above.
Capital expenditures for the second fiscal quarter are expected to be approximately
The guidance provided above is only an estimate of what the Company believes is realizable as of the date of this release. The guidance also excludes any impact from any mergers, acquisitions and divestiture activity that may occur during the quarter. Actual results will vary from the guidance and the variations may be material. The Company undertakes no intent or obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.
Financial Results Conference Call
Non-GAAP Financial Measures
In addition to GAAP reporting,
About
Cautionary Note Regarding Forward-Looking Statements
This announcement contains forward-looking statements that address our expected future business and financial performance. These forward-looking statements are based on current expectations, estimates, forecasts and projections of future Company or industry performance, based on management's judgment, beliefs, current trends and market conditions, and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Accordingly, we caution you not to place undue reliance on these statements. Particular uncertainties that could materially affect future results include our ability to integrate and realize the expected benefits from our acquisition of LSI; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our ability to increase our internal manufacturing capacity to meet customer demand; our ability to accurately estimate customers' demand and adjust supply chain and third party manufacturing capacity accordingly; our ability to improve our manufacturing efficiency and quality; cyclicality in the semiconductor industry or in our target markets; increased dependence on the volatile wireless handset market and on the enterprise storage market; delays, challenges and expenses associated with integrating acquired companies with our existing businesses and our ability to achieve the growth prospects and synergies expected from acquisitions we may make, including our recent acquisitions of LSI and PLX, and our pending acquisition of
| AVAGO TECHNOLOGIES LIMITED | |||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED | |||
| (IN MILLIONS, EXCEPT PER SHARE DATA) | |||
| Fiscal Quarter Ended | |||
| February 1, | November 2, | February 2, | |
| 2015 | 2014 | 2014 | |
| Net revenue | $ 1,635 | $ 1,590 | $ 709 |
| Cost of products sold: | |||
| Cost of products sold | 690 | 678 | 347 |
| Purchase accounting effect on inventory | 4 | 10 | -- |
| Amortization of intangible assets | 113 | 108 | 18 |
| Restructuring charges | 2 | 6 | 5 |
| Total cost of products sold | 809 | 802 | 370 |
| Gross margin | 826 | 788 | 339 |
| Research and development | 235 | 234 | 107 |
| Selling, general and administrative | 117 | 129 | 74 |
| Amortization of intangible assets | 59 | 91 | 7 |
| Restructuring charges | 14 | 33 | 12 |
| Total operating expenses | 425 | 487 | 200 |
| Operating income | 401 | 301 | 139 |
| Interest expense | (54) | (54) | -- |
| Other income, net | 4 | 16 | -- |
| Income from continuing operations before income taxes | 351 | 263 | 139 |
| Provision for income taxes | 13 | 126 | 5 |
| Income from continuing operations | 338 | 137 | 134 |
| Income (loss) from discontinued operations (including gains on disposals of $14 million and $18 million in the fiscal quarters ended February 1, 2015 and November 2, 2014, respectively), net of income taxes | 13 | (2) | -- |
| Net income | $ 351 | $ 135 | $ 134 |
| Basic income (loss) per share: | |||
| Income per share from continuing operations | $ 1.33 | $ 0.54 | $ 0.54 |
| Income (loss) per share from discontinued operations, net of income taxes | $ 0.05 | $ (0.01) | $ -- |
| Net income per share | $ 1.38 | $ 0.53 | $ 0.54 |
| Diluted income (loss) per share: | |||
| Income per share from continuing operations | $ 1.22 | $ 0.50 | $ 0.53 |
| Income (loss) per share from discontinued operations, net of income taxes | $ 0.04 | $ -- | $ -- |
| Net income per share | $ 1.26 | $ 0.50 | $ 0.53 |
| Shares used in per share calculations: | |||
| Basic | 255 | 254 | 249 |
| Diluted | 278 | 272 | 255 |
| Share-based compensation expense included in continuing operations: | |||
| Cost of products sold | $ 6 | $ 6 | $ 3 |
| Research and development | 19 | 19 | 8 |
| Selling, general and administrative | 24 | 24 | 13 |
| Total share-based compensation expense | $ 49 | $ 49 | $ 24 |
| AVAGO TECHNOLOGIES LIMITED | |||
| NON-GAAP FINANCIAL SUMMARY - UNAUDITED (1) | |||
| (IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA) | |||
| Fiscal Quarter Ended | |||
| February 1, | November 2, | February 2, | |
| 2015 | 2014 | 2014 | |
| Net revenue | $ 1,657 | $ 1,610 | $ 709 |
| Gross margin | $ 974 | $ 939 | $ 366 |
| % of net revenue | 59% | 58% | 52% |
| Research and development | $ 210 | $ 214 | $ 98 |
| Selling, general and administrative | $ 83 | $ 89 | $ 44 |
| Total operating expenses | $ 293 | $ 303 | $ 142 |
| % of net revenue | 18% | 19% | 20% |
| Operating income | $ 681 | $ 636 | $ 224 |
| Income before income taxes | $ 631 | $ 598 | $ 224 |
| Provision for income taxes | $ 35 | $ 42 | $ 7 |
| Net income | $ 596 | $ 556 | $ 217 |
| Net income per share - diluted | $ 2.09 | $ 1.99 | $ 0.84 |
| Shares used in per share calculation - diluted | 285 | 280 | 258 |
| (1) A reconciliation of the non-GAAP measures presented above to the most directly comparable GAAP financial data appears on the next page. These non-GAAP measures are provided in addition to and not as a substitute for measures of financial performance prepared in accordance with GAAP. The financial summary includes the effect of purchase accounting on revenues and excludes purchase accounting effect on inventory, amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs, including integrations costs, income (loss) from and gain or loss on discontinued operations and income tax effects of non-GAAP reconciling adjustments. | |||
| AVAGO TECHNOLOGIES LIMITED | |||
| FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED | |||
| (IN MILLIONS, EXCEPT DAYS) | |||
| Fiscal Quarter Ended | |||
| February 1, | November 2, | February 2, | |
| 2015 | 2014 | 2014 | |
| Net revenue on GAAP basis | $ 1,635 | $ 1,590 | $ 709 |
| Acquisition-related purchase accounting revenue adjustment | 22 | 20 | -- |
| Net revenue on non-GAAP basis | $ 1,657 | $ 1,610 | $ 709 |
| Gross margin on GAAP basis | $ 826 | $ 788 | $ 339 |
| Acquisition-related purchase accounting revenue adjustment | 22 | 20 | -- |
| Purchase accounting effect on inventory | 4 | 10 | -- |
| Amortization of intangible assets | 113 | 108 | 18 |
| Share-based compensation expense | 6 | 6 | 3 |
| Restructuring charges | 2 | 6 | 5 |
| Acquisition-related costs | 1 | 1 | 1 |
| Gross margin on non-GAAP basis | $ 974 | $ 939 | $ 366 |
| Research and development on GAAP basis | $ 235 | $ 234 | $ 107 |
| Share-based compensation expense | 19 | 19 | 8 |
| Acquisition-related costs | 6 | 1 | 1 |
| Research and development on non-GAAP basis | $ 210 | $ 214 | $ 98 |
| Selling, general and administrative expense on GAAP basis | $ 117 | $ 129 | $ 74 |
| Share-based compensation expense | 24 | 24 | 13 |
| Acquisition-related costs | 10 | 16 | 17 |
| Selling, general and administrative expense on non-GAAP basis | $ 83 | $ 89 | $ 44 |
| Total operating expenses on GAAP basis | $ 425 | $ 487 | $ 200 |
| Amortization of intangible assets | 59 | 91 | 7 |
| Share-based compensation expense | 43 | 43 | 21 |
| Restructuring charges | 14 | 33 | 12 |
| Acquisition-related costs | 16 | 17 | 18 |
| Total operating expenses on non-GAAP basis | $ 293 | $ 303 | $ 142 |
| Operating income on GAAP basis | $ 401 | $ 301 | $ 139 |
| Acquisition-related purchase accounting revenue adjustment | 22 | 20 | -- |
| Purchase accounting effect on inventory | 4 | 10 | -- |
| Amortization of intangible assets | 172 | 199 | 25 |
| Share-based compensation expense | 49 | 49 | 24 |
| Restructuring charges | 16 | 39 | 17 |
| Acquisition-related costs | 17 | 18 | 19 |
| Operating income on non-GAAP basis | $ 681 | $ 636 | $ 224 |
| Income from continuing operations before income taxes on GAAP basis | $ 351 | $ 263 | $ 139 |
| Acquisition-related purchase accounting revenue adjustment | 22 | 20 | -- |
| Purchase accounting effect on inventory | 4 | 10 | -- |
| Amortization of intangible assets | 172 | 199 | 25 |
| Share-based compensation expense | 49 | 49 | 24 |
| Restructuring charges | 16 | 39 | 17 |
| Acquisition-related costs | 17 | 18 | 19 |
| Income before income taxes on non-GAAP basis | $ 631 | $ 598 | $ 224 |
| Provision for income taxes on GAAP basis | $ 13 | $ 126 | $ 5 |
| Income tax effects of non-GAAP reconciling adjustments | 22 | (84) | 2 |
| Provision for income taxes on non-GAAP basis | $ 35 | $ 42 | $ 7 |
| Net income on GAAP basis | $ 351 | $ 135 | $ 134 |
| Acquisition-related purchase accounting revenue adjustment | 22 | 20 | -- |
| Purchase accounting effect on inventory | 4 | 10 | -- |
| Amortization of intangible assets | 172 | 199 | 25 |
| Share-based compensation expense | 49 | 49 | 24 |
| Restructuring charges | 16 | 39 | 17 |
| Acquisition-related costs | 17 | 18 | 19 |
| Income tax effects of non-GAAP reconciling adjustments | (22) | 84 | (2) |
| Discontinued operations, net of income taxes | (13) | 2 | -- |
| Net income on non-GAAP basis | $ 596 | $ 556 | $ 217 |
| Shares used in per share calculation - diluted on GAAP basis | 278 | 272 | 255 |
| Non-GAAP adjustment | 7 | 8 | 3 |
| Shares used in per share calculation - diluted on non-GAAP basis(1) | 285 | 280 | 258 |
| Days sales outstanding on GAAP basis | 40 | 45 | |
| Non-GAAP adjustment | (1) | (3) | |
| Days sales outstanding on non-GAAP basis(2) | 39 | 42 | |
| Inventory Days on Hand on GAAP basis | 66 | 69 | 75 |
| Non-GAAP adjustment | 1 | 1 | 1 |
| Inventory Days on Hand on non-GAAP basis(3) | 67 | 70 | 76 |
| (1) The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of share-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. | |||
| (2) Days sales outstanding on a non-GAAP basis includes the impact of the acquisition-related purchase accounting revenue adjustment and excludes the impact of accounts receivable related to discontinued operations. | |||
| (3) Inventory days on hand on a non-GAAP basis excludes the impact of purchase accounting on inventory, amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs, and cost of products sold attributable to discontinued operations. | |||
| AVAGO TECHNOLOGIES LIMITED | |||||||||||||
| GAAP AND NON-GAAP NET REVENUE BY SEGMENT - UNAUDITED | |||||||||||||
| (IN MILLIONS, EXCEPT PERCENTAGES) | |||||||||||||
| Fiscal Quarter Ended | |||||||||||||
| February 1, | November 2, | February 2, | |||||||||||
| 2015 | 2014 | 2014 | Growth Rates | ||||||||||
| GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | GAAP | Non-GAAP | |||||||
| Net revenue by segment: | $ | % | $ | % | $ | % | $ | % | $ | Q/Q | Y/Y | Q/Q | Y/Y |
| Wireless Communications | $ 664 | 41 | $ 664 | 40 | $ 628 | 40 | $ 628 | 39 | $ 349 | 6% | 90% | 6% | 90% |
| Enterprise Storage | 486 | 30 | 486 | 29 | 463 | 29 | 463 | 29 | -- | 5% | -- | 5% | -- |
| Wired Infrastructure | 347 | 21 | 347 | 21 | 352 | 22 | 352 | 22 | 228 | -1% | 52% | -1% | 52% |
| Industrial & Other | 138 | 8 | 160 | 10 | 147 | 9 | 167 | 10 | 132 | -6% | 5% | -4% | 21% |
| Total net revenue | $ 1,635 | 100 | $ 1,657 | 100 | $ 1,590 | 100 | $ 1,610 | 100 | $ 709 | ||||
| AVAGO TECHNOLOGIES LIMITED | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED | ||
| (IN MILLIONS) | ||
| February 1, | November 2, | |
| 2015 | 2014 (1) | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 2,569 | $ 1,604 |
| Trade accounts receivable, net | 718 | 782 |
| Inventory | 500 | 519 |
| Assets held-for-sale | 4 | 628 |
| Other current assets | 307 | 302 |
| Total current assets | 4,098 | 3,835 |
| Property, plant and equipment, net | 1,269 | 1,158 |
| Goodwill | 1,596 | 1,596 |
| Intangible assets, net | 3,445 | 3,617 |
| Other long-term assets | 289 | 285 |
| Total assets | $ 10,697 | $ 10,491 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 452 | $ 515 |
| Employee compensation and benefits | 132 | 219 |
| Other current liabilities | 215 | 236 |
| Current portion of long-term debt | 46 | 46 |
| Total current liabilities | 845 | 1,016 |
| Long-term liabilities: | ||
| Long-term debt | 4,531 | 4,543 |
| Convertible notes payable to related party - non-current | 923 | 920 |
| Pension and post-retirement benefit obligations | 496 | 506 |
| Other long-term liabilities | 274 | 263 |
| Total liabilities | 7,069 | 7,248 |
| Shareholders' equity: | ||
| Ordinary shares, no par value | 2,131 | 2,009 |
| Retained earnings | 1,546 | 1,284 |
| Accumulated other comprehensive loss | (49) | (50) |
| Total shareholders' equity | 3,628 | 3,243 |
| Total liabilities and shareholders' equity | $ 10,697 | $ 10,491 |
| (1) Amounts as of November 2, 2014 have been derived from audited financial statements as of that date. | ||
| AVAGO TECHNOLOGIES LIMITED | |||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED | |||
| (IN MILLIONS) | |||
| Fiscal Quarter Ended | |||
| February 1, | November 2, | February 2, | |
| 2015 | 2014 | 2014 | |
| Cash flows from operating activities: | |||
| Net income | $ 351 | $ 135 | $ 134 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Depreciation and amortization | 226 | 250 | 57 |
| Share-based compensation | 49 | 54 | 24 |
| Tax benefits of share-based compensation | 21 | 42 | 4 |
| Excess tax benefits from share-based compensation | (20) | (39) | (3) |
| Gains on sales of businesses | (14) | (18) | -- |
| Amortization of debt issuance costs and accretion of debt discount | 7 | 7 | -- |
| Gain from post-retirement medical plan curtailment and settlement | -- | -- | (3) |
| Deferred taxes | (6) | (72) | -- |
| Other | 11 | 1 | -- |
| Changes in assets and liabilities, net of acquisitions: | |||
| Trade accounts receivable, net | 64 | (180) | 95 |
| Inventory | 33 | (6) | (1) |
| Accounts payable | (78) | 52 | (24) |
| Employee compensation and benefits | (90) | 2 | (39) |
| Other current assets and current liabilities | (66) | 188 | (7) |
| Other long-term assets and long-term liabilities | (7) | (35) | (8) |
| Net cash provided by operating activities | 481 | 381 | 229 |
| Cash flows from investing activities: | |||
| Proceeds from sales of businesses | 650 | 450 | -- |
| Purchases of property, plant and equipment | (162) | (189) | (52) |
| Proceeds from disposals of property, plant and equipment | 26 | -- | -- |
| Acquisition of business, net of cash acquired | -- | (317) | -- |
| Proceeds from sale of investments | -- | 21 | -- |
| Net cash provided by (used in) investing activities | 514 | (35) | (52) |
| Cash flows from financing activities: | |||
| Debt repayments | (12) | (12) | -- |
| Issuance of ordinary shares | 51 | 38 | 19 |
| Repurchases of ordinary shares | -- | -- | (12) |
| Dividend payments to shareholders | (89) | (81) | (62) |
| Excess tax benefits from share-based compensation | 20 | 39 | 3 |
| Payments for settlement of acquisition liability | -- | (4) | -- |
| Proceeds from government grants | -- | 1 | 2 |
| Net cash used in financing activities | (30) | (19) | (50) |
| Net increase in cash and cash equivalents | 965 | 327 | 127 |
| Cash and cash equivalents at beginning of period | 1,604 | 1,277 | 985 |
| Cash and cash equivalents at end of period | $ 2,569 | $ 1,604 | $ 1,112 |
CONTACT:Avago Technologies Limited Ashish Saran Investor Relations +1 408 435 7400 investor.relations@avagotech.com
